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Alchemy halts investments until 2011

The firm’s funding structure, whereby LPs commit to a private equity programme on an annual basis, may be restructured in the wake of Jon Moulton’s departure.

Alchemy Partners, a London-headquartered private equity firm founded in 1997, has ceased making new investments and is reconsidering its funding structure as it seeks to steady the ship following the rancorous departure of co-founder Jon Moulton.

Jon Moulton

The firm’s £1 billion  (€1.1 billion; $1.7 billion) private equity platform, dubbed the Alchemy Investment Plan, has not used the traditional private equity fund structure of a 10-year closed-end limited partnership, but instead allows LPs to decide on their commitment to the programme on a rolling annual basis. If they choose not to commit the same amount the following year, the LP must give prior notice – a move that the California State Teachers’ Retirement System made following the departure of co-founder Martin Bolland in late 2007.

Moulton called for an “early orderly Plan termination” in a letter he sent to LPs in September, which simultaneously announced his resignation from the firm following a strategy spat with Alchemy’s other partners. “The Plan’s economics are no longer favourable,” he said, noting that the Plan’s investment capacity had reduced in “a few short years” from £400 million per year to £100 million. Moulton’s parting letter, described by the financial press as a “bomb” and a “vicious attack”, also called into question the investment strategies and capabilities of Alchemy’s remaining partners.

A source close to the firm confirmed that no decision had yet been made regarding the ongoing structure of the private equity programme, but that a review was underway.

The source also confirmed that the firm will not be making any new investments over the next year and will instead focus on its existing portfolio, as first reported by Private Equity News. It may make follow-on investments and carry out bolt-on acquisitions for its current portfolio, the source added.

Moulton has gone on to set up a turnaround-focused buyout shop, Better Capital. The firm will reportedly look to raise around £100 million in capital via a public listing in 2010.